What to do if primary documents have been destroyed?
Amid relentless Russian attacks, not only business premises and goods are damaged, but also documents kept in offices or warehouses. This includes the very primary documents that entrepreneurs are required to keep for years, almost as securely as cash in a safe. If such documents are lost, they must be restored without delay. In practice, however, this is not always possible, since a counterparty may find itself in the same situation and may also have lost its paper-based primary documents. Let us take a look what can be done in such cases.
Pursuant to clause 44.5 of Article 44 of the Tax Code, if primary documents are lost or damaged, a business entity must:
· notify the State Tax Service of Ukraine in writing at the place, where it is registered for tax purposes, of the loss of the primary documents within five days of the date of the event;
· attach to the notice documents confirming the occurrence of the event that resulted in the loss or damage of the primary documents;
· restore the primary documents within 90 calendar days from the day following the date on which the tax authorities were notified.
At the beginning of the hostilities, submitting a letter to the Chamber of Commerce and Industry concerning the loss of primary documents was sufficient to avoid problems with the tax authorities. However, amendments were made to the Tax Code of Ukraine introducing special rules for confirming primary data. These rules are set out in subclause 69.28 of clause 69 of subsection 10 of Section XX “Transitional Provisions” of the Tax Code of Ukraine. In particular, if primary documents are destroyed, the business entity must submit a notice in any form to the controlling authority at its principal place of tax registration. The notice must state the circumstances that led to the loss, the respective tax (reporting) periods and a general list of the primary documents (including their details, where possible). The notice must be signed by the head of the company (or the individual entrepreneur) and the chief accountant (if any). It is advisable to attach copies of documents confirming that the primary documents were damaged or destroyed. The notice may be submitted through the Taxpayer’s Electronic Cabinet in the section “Correspondence with the State Tax Service” or sent by registered mail with an acknowledgment of receipt. Once such a notice has been submitted, a moratorium is imposed on documentary tax audits concerning the specified tax (reporting) periods. The tax authorities should not conduct audits of the reporting periods specified in the notice, even after martial law has ended.
If the tax authority refuses to apply these provisions to the entrepreneur, it must issue a reasoned written decision stating the grounds and evidence for the refusal no later than one month after receiving the respective notice. The decision of the controlling authority may be appealed through administrative or court proceedings. Until a final decision is made in the case, the tax authority may neither question the figures reported in the tax returns nor initiate any audit concerning the tax (reporting) periods specified in the respective notice. This should therefore be kept in mind, just in case. At present, these special rules apply to taxpayers that conduct activities in territories where hostilities are or were taking place, as well as in temporarily occupied territories. However, there are grounds to expect that, in the near future, the tax authorities will also recognize rear areas where documents are being destroyed as a result of shelling as falling within these rules.
However, it must be clearly understood that the absence of audits does not mean that the documents need not be restored at all. Primary documents are the key evidence that a business entity actually lost property as a result of hostilities. Therefore, before submitting a notice to the tax authority, an act documenting the loss (destruction) of the documents should be drawn up, stating the reasons for their loss (hostilities, shelling, fire etc.) and listing the documents that were lost. It is also necessary to collect evidence of the reason for the loss. To this end, document the circumstances of the destruction: take photographs, obtain certificates from the State Emergency Service of Ukraine and the police, prepare reports on damage of the premises, and collect evidence confirming that the premises could not be accessed due to occupation or hostilities. If access to the place where the documents were kept is restored, an inventory must be conducted and its results reflected in the accounting records. It is also necessary to restore whatever can be recovered. There may be electronic copies in databases, accounting software, or the Unified Register of Tax Invoices in the case of tax invoices. Data should also be requested from registers or from other third parties involved in the process (banks and postal operators).
Natalia Shcherbak
Accounting and Tax Consultant